Honda Thailand Launching Ambitious Expansion Plan

Bouncing back from the massive floods that wiped out its Thai production for months, Honda announces a TB20 billion ($674 million) plan to build a new assembly plant and expand its existing operation to raise its production to 420,000 units a year in 2015.

The auto maker will spend TB17.5 billion ($587.7 million) to build a 120,000-unit assembly and engine plant in Prachinburi opening in 2015 and TB2 billion ($67.2 million) to expand annual capacity at its Ayutthaya facilities to 300,000 units in early 2014.

Construction of the Prachinburi plant is scheduled to begin in July.

About 300,000 units will be for the Thai domestic market, with 120,000 earmarked for export.

Asian Honda and Honda Thailand President and CEO Hiroshi Kobayashi notes the expansion announcement comes a year after the auto maker was only beginning to recover from the 2011 flooding that halted production at Ayutthaya until last April.

“Honda actually emerged from the crisis stronger,” Kobayashi says. After scrapping 1.5 million flood-damaged cars, the auto maker set a sales record in Thailand in 2012, introducing nine new models and operating Ayutthhaya at capacity for nine months after operations resumed in April.

Honda is committed to growing its Thai business, and the expansion program is to ensure the auto maker’s Thai production capabilities meet expected global demand for its small and fuel-efficient vehicles, Kobayashi adds.

The investment in the new Prachinburi assembly and engine plant covers the cost of acquiring 27.5 million sq.-ft. (2.56 million sq.-m) of land – away from potential flood areas  – and building the factory with floor space of 2.3 million sq.-ft. (214,000 sq.-m).

“At the start of production, it will employ approximately 2,500 associates including seasonal workers,” Kobayashi says.

Honda intends the new facility to be the auto maker’s most advanced manufacturing operation in Asia and Oceania. It will follow the advanced-manufacturing innovations being introduced at its new Yorii assembly plant in Japan. These include shorter and greener production processes for welding, painting and assembling automobiles.

That factory, mainly producing subcompact models to meet increasing global demand, itself will have reduced carbon-dioxide emissions and increased use of recycled water in production processes.

“As we envision continuous growth of the subcompact car market in Thailand and more exports to countries in ASEAN (Association of Southeast Asian Nations), Oceania, the Middle East, Africa, the Caribbean and other countries around the world, Honda will increase our production capacity while also enhancing our product lineup,” Kobayashi says.

Honda spent TB880 million ($29.6 million) on the first phase of the Ayutthaya assembly plant expansion that raised annual production capacity from 240,000 units to 280,000 units in January. The second phase starting in April will increase output to 300,000.

Honda believes the Thai market’s overall sales volume this year should be equal to or slightly lower than 2012 at about 1.2 million units. It has set a sales target of more than 200,000 deliveries, compared with 141,000 last year.

–with Edd Ellison in Bangkok